TN’s liquor policy hits spirits industry

The spirits industry in India has encountered a minor hiccup with Tamil Nadu’s policy on liquor procurement. With the Tamil Nadu Government introducing a bill in the Assembly last month to raise the ceiling on excise duty imposed on liquor and alcohol products, players in the liquor industry are wary, since most have already reported a slump in sales.

In 2012, Tamil Nadu had proposed 14.5 per cent tax on liquor as part of its efforts to generate ₹1,500 crore revenue. The State Government has earned ₹5,034 crore in excise in 2013-14 (provisionally) from the manufacture and sale of liquor. Tilaknagar Industries, which owns brands like Mansion House, was in talks to acquire Coimbatore-based Indian Made Foreign Liquor (IMFL) maker, Imperial Spirits. The asking price was ₹600 crore.

Amit Dahanukar, Chairman of Tilaknagar Industries, said the decision to acquire the Tamil Nadu player had to be discontinued, given the many changes in the market.

“Tamil Nadu is a large brandy market, and we are the leaders in brandy. Though the acquisition fell largely due to valuations, the dynamics in the TN market also played a part,” he said.

Imperial Spirits sells two popular brands of brandy, Imperial XO Premium Brandy and VSOP Brandy. Dahanukar termed the State as an important liquor consuming one, accounting for 19 per cent of overall consumption.

“Our volumes were affected last year by the supply side constraints in Tamil Nadu. On account of the changes undertaken by the Government regarding liquor ordering process which favoured local players, our sales volume in the State declined during 2012-13, as well as in the current year,” he said.

Though deals in the liquor industry have gathered pace after Diageo agreed to purchase a controlling majority stake in United Spirits (USL), the latter’s business in Tamil Nadu has also been adversely affected by skewed order placement by the parastatal buying agency in that State.

USL said it had deliberately de-emphasised sales of its popular brands, which recorded sales of 87.6 million cases, a drop of 8 per cent from FY13 volumes of 95 million cases. “The defocus was due to rising cost of inputs and forced curtailment of capacity in Tamil Nadu,'' the company said.